EU CumEx tax fraud finally reaches the U.S.

If you don't follow international taxes, you probably missed the CumEx story. The team of investigative reporters who uncovered the alleged tax fraud schemes back in 2017 characterized it as "the largest tax robbery in the history of Europe."

Thirty-eight reporters from 19 newsrooms in 12 countries collaborated across borders to dig through 180,000 pages of documents related to the allected tax fraud.

Just what did the alleged tax schemers do?

The short version is, allegedly, that banks, stock traders, and lawyers obtained billions from European treasuries through suspected fraud and speculation involving investment dividend taxes.

According to the journalists, the perpetrators received multiple capital gains tax refunds from withholdings on dividend distributions, even though the tax has only been paid once – or not at all.

That shifting payments status or existence, or not, prompted the CumEx moniker. It comes from the Latin for "with without," and refers to the disappearing nature of the fraudulent dividend payments.

The total cost to the 11 European countries where the scheme was implemented totals around €55 billion (almost $65 billion in U.S. dollars), making it, again per the reporters, the biggest tax fraud of all time.

Germany was the hardest hit, but the fraud also took place in Austria, Belgium, Denmark, Finland, France, Italy, the Netherlands, Norway, Spain, and Switzerland.

American connections: Now the CumEx files, also sometimes written as Cumex or Cum-Ex, have come to America.

Belgian tax authorities have filed seven lawsuits in the southern district of New York against a number of American citizens and one pension fund, claiming tax evasion, according to a report in The Belgium Times.

The cases are an offshoot of the CumEx scandal, in which Belgium suffered relatively minor losses of a €221.5 million ($260.6 million).

Still, €221.5/$260.6 million is nothing to write off.

The cases taken to the U.S. legal system involve withholding tax allegedly paid in the United States on shares from several major companies. Because of a double-taxation treaty with the U.S., the firms were entitled to be repaid the tax amounts.

The court filings contend that pension fund shell companies set up as alleged holders of the firms' shares never really contained any of the assets. That means, say Belgium officials, that they never paid a cent in withholding tax in the United States.

And that means, argue Belgian tax officials, they were entitled to zero tax reimbursements.

Complicated global scheme: Yeah, it's complicated. That's why I'm leaving the details of the CumEx cases and the Belgium's foray into the U.S. court system to the original reports. This weekend's multiple Saturday Shout Outs go to:

• Correctiv, which as the German (in English) version of the Cum-Ex Files investigation,
• Bloomberg BNA's introduction to the 55 billion euro tax heist,
• The Conversation's look into the robbery of the century: the cum-ex trading scandal and why it matters,
• The New York Times report on possibly the Biggest Tax Heist Ever. And Europe Wants Justice,
• London-based law firm Rahman Ravelli's explanation, FAQs and infographic, and 
• The Brussels Times article on Belgium's U.S. court filings.

Simplifying isn't easy: I'll let you read any or all of these articles at your leisure. But I think an observation by Alex Simpson, Senior Lecturer in Criminology at Macquarie University in Sydney, Australia, in The Conversation article is worth highlighting:

Cum-ex deals illustrate perfectly how easily complexity is used as a tool in finance to misdirect, obfuscate and perplex. The complexity also plays a key role in clouding public understanding of these alleged crimes. It's easier for the media to focus public attention on simpler crimes with clearly identifiable victims.

That's something to consider every time any lawmaker in any country talks about simplifying taxes, but then the opposite happens when the legislation and eventual laws are passed and implemented.

You also might find these items of interest:

• 2021 housing cost tax break amounts for U.S. expatriates
• Tax reform is a global concern in wake of COVID-19's costs
• John McAfee, software developer charged with U.S. tax evasion, dies in Spanish jail

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